Posted on 11/04/2002 5:34:24 PM PST by rohry
When the real estate forclosures start and then mushroom into gigantic numbers, which I believe to be in the near future, the entire economic system will crumble and make the last depression look like childs play.
Yup.
For example...
A $2K/mo PITI payment will get you a $350K house, with 10% down, @ 4.5% ($315K mortgage). When that interest rate creeps up to 7% (like late '00), the same $2k/mo gets you a $274K house with 10% down. That means, for all of you who care, that when Jose and Maria buy their home, and interest rates go up, several buyers will be knocked out of the market. If the job market remains as strong as it was when Joe and Mary bought their home, they will have to sell their home at a discount, to compensate for the additional costs of borrowing.
They will be down $76 grand. That's all of the $35K they put down, $41K in additional lost money, plus another $17K in RE fees on top of the $76K, for a grand total of...
$93,000 down the crapper, just to compensate for the interest rates.
Now, if the local job market starts to suck...
So, if Joe loses his job at the local glass box, or Mary loses her commissions selling real estate, they will still have to make that $2K/mo payment, unless they got a variable, in which case, the payment may likely go up. If they are forced to sell, they would likely go to foreclosure, as it would be cheaper than losing almost $100 grand. Their home will be sold against all of the other forclosures.
Glad the FED will cut. That will solve all our problems. Wait a minute...that caused all our problems.
Oh, well, one way to avoid a hangover is to keep drinking.
Debt, DEBT, Debt, Debt, Debt!!!
I don't know if I would want to win tomorrow's election.
The fix comes from investment and economic growth. Your doomsday list comes from static analysis, no doubt.
WOW! Dynamic analysis! I am impressed. Do you listen to Rush as well?
The level of corporate debt is not static. It is real, and has to be dealt with. I am not talking of "growing" our way out of public debt (which we won't - we have written a half trillion USD this year alone!!!), I am talking about the amount of leverage needed to produce a buck. That is what corporations have to deal with, and "growth" isn't going to fix the problem. Going deeper into debt to get out of debt is not a workable business model, under almost every circumstance. Eventually, you get defaults and CH7. United Airlines is going to test the waters very soon on this subject.
When foreigners sell us crap in exchange for green slips of paper, eventually, they will want to redeem those pieces of paper for things they can use. Right now, they are using them to speculate in our financial markets, but if they leak, USDs become of little value, and the USD will leak. That's why you have the FED trying to cut rates to strengthen the dollar. It works in the short term, but long term it is a disaster.
Housing bubble? How do you make that "dynamic?" Have the GOP talking points addressed this?
Another thing...saying that bears need another terrorist attack...that's indicative of someone without much depth in their thought.
Keep listening to Rush. When he reports on the Pubbie landslide on Wednesday, bring a roll of paper towels to clean up after yourself.
The fix comes from investment and economic growth. Your doomsday list comes from static analysis, no doubt.
Am I to understand this is the new standard of bullish research and investment strategy? Call CNBC...you are their man!
Yeah, but Rush "I don't have a clue about most things" Limbaugh says GDP growth is 3.5% and all is well with the economy. Of course, those of us who actually look at economic reality ... instead of the statistics the government feeds the markets ... know that things are going to get worse before they get better. "Conservatives" are going to regret the day Gore didn't become president ... since the coming economic crash will be blamed on Bush Jr. instead.
This wins for the most intelligent post on FR this political season.
Rush has become nothing but a cheerleader. His show is tedious, predictable, and unimaginative. I liked Rush back before the Gulf War. He was an entertainer, not a political spin doctor. Since he got serious, he is just another mouth on the radio. Every day it is the same thing - Pubbies good, Dems bad.
I would love to compare the last year's econ data to those of the UNIBANGER's years. Of course, anything good is GWB's doing, and all bad things are Billzebubba's legacy.
If the current rally on Wall Street dies anytime soon, it is going to be very difficult not to suspect Pubbie shenanigans and a ramp-up for the election. After all, when the ILWU got locked out by the PMA, months after their contract expired, Rush, and a bunch of FR zombies, said they were doing it to destroy the economy for the election.
It is sad to see our guys behave the same way the RATS behaved when X42 was in power. It makes you believe that Pubbies/Rats are both interested in the same thing - POWER!!! They both don't give a damn about Americans.
When the economy goes down for the last time, the Pubbies are going to be in the political desert for another 70 years.
What's their overall percentage in cash? In stocks?
Bet they aren't anywhere near what they were in, say, 1994.
I don't think he got it. Still believes in rational actors, and all that.
"next great secular bull market"...could Microsoft be the one to ignite it?
No.
Capacity.
His posts show he has no experience other than economic platitudes, and political hopes.
What is going to confound many Pubbie-first political hacks is when the markets and economy fully tank when there is not one DEM in any leadership position anywhere on the national stage. The cries will be all "we inherited it," "we are victims of timing..." Funny, how that didn't work in 1980.
When the economy tanks with nothing on the scene other than Pubbies with great hair-dos, many Pubbie-statists will be taking Prozac by the shovel load.
"The economy is fine - it has to be because the GOP is in power. "
Why not mention our best corporations, such as Microsoft, which has no debt, is profitable, and has $40 billion dollars in cash? Most of our best corporations are in a similar position. Or if you want to stick with airlines, why not mention Southwest? Or why not mention entrepreneurs with good ideas, who need capital to start businesses to use up all that excess capacity you're talking about?
When foreigners sell us crap in exchange for green slips of paper, eventually, they will want to redeem those pieces of paper for things they can use. Right now, they are using them to speculate in our financial markets, but if they leak, USDs become of little value, and the USD will leak.
Foreigners sell us things with market value. In return they invest in our economy, or other financial assets which also have a market value. At this point in their development they are filling a gap for goods they can produce at a lower cost. As they attain more wealth, they'll become more interested in our goods and services.
That's why you have the FED trying to cut rates to strengthen the dollar. It works in the short term, but long term it is a disaster.
That's funny. How many central banks lower interest rates in order to strengthen their currency?
Housing bubble? How do you make that "dynamic?" Have the GOP talking points addressed this?
It's dynamic because real estate prices in tight markets are adjusting to lower interest rates.
BTW, I don't listen to Rush or GOP talking points. Who do you listen to?
You obviously haven't read any of my previous posts. I've been very critical of the Bush administration's economic policies. Next time though, when you want to call me a name, show that you have some guts and do it directly.
You too. If you've got something to say, do it directly.
Next time though, when you want to call me a name, show that you have some guts and do it directly.
How will I ever sleep? Your tough guy rants make me quake in my desk chair.
OK, posts #6, 35, &40 make you look like an idiot.
Political window dressing does not fix financial markets and business climates - washing out of bad business models and high debt loads do.
Yes, Microsoft and Southwest Airlines are two great corporations. So what? What about all the other manufacturers out there? Inability to get loans and work off capacity is something that appointing the right ethno-appropriate talking heads in Washington isn't going to fix.
The housing bubble is reacting to more than low interest rates - the housing bubble is in a speculative frenzy where we are going to test the level of the greatest fool. When property values are going up 20% yoy, and salaries are stagnant, you have to expect that a bubble is in play. Of course, many scoffed at the NAZ bubble during the late 90s for many of the same reasons.
What, EXACTLY, did Clinton and Rubin do which was so bad? We agree that Al.com was at fault.
As for me not saying it to your face...#6, 35 &40 can only be posted by an idiot or a political hack. If you posted them, then...take your pick.
Honestly, do you really think that appointing someone with a nice hair-doo to a figurehead position will end the bear? At these valuations (S&P p/e of 49)?
I never said it did, but a change in economic policies, with the appontment of new people will. Bad companies are washed out during good and bad economic times. Some have high debt, others have almost none. That's what happens in a competitive system that requires risk taking to succeed, and where in a healthy economy, new competitors are coming along all the time.
Yes, Microsoft and Southwest Airlines are two great corporations. So what? What about all the other manufacturers out there? Inability to get loans and work off capacity is something that appointing the right ethno-appropriate talking heads in Washington isn't going to fix.
What about them? How much liquidation and austerity are required to have a healthy economy according to your beliefs?
The housing bubble is reacting to more than low interest rates - the housing bubble is in a speculative frenzy where we are going to test the level of the greatest fool. When property values are going up 20% yoy, and salaries are stagnant, you have to expect that a bubble is in play. Of course, many scoffed at the NAZ bubble during the late 90s for many of the same reasons.
Most of the housing value increases are due to lower interest rates. Some people are making higher salaries, and other people have built up wealth over the past 20 years. Money goes where it's treated best. Some real estate prices will be sustained, others won't. Yes, some people are taking on too much risk and will fail. Others will succeed. That's the way our capitalist system works.
What, EXACTLY, did Clinton and Rubin do which was so bad? We agree that Al.com was at fault.
Rubin aggressively intervened to strengthen the dollar in 1995 without keeping a check on its effect on dollar linked currencies. Greenspan kept interest rates too high relative to the dollar which made the dollar stronger. The Asian currency crisis was the result. I suspect that Clinton had Rubin do the dirty work to help him get elected in 1996, and continued in order to get him through his scandals. Greenspan also made the mistake of targeting equity prices and full employment with his rate hikes in 1999 and 2000, instead of price levels. Greenspan also used bad GDP growth data.
If I had a dollar for everytime I heard this pundit or that mutual fund salesman say, "all the bad news is already priced in". Well, just having all the bad news priced in (which it never is) isn't enough for me to declare the bear over. Things could get much worse before they get any better.
Richard W.
Now there is something that we can definitely agree on.
Richard W.
By definition, the vast majority of investors must be wrong at any major market turn. They might be looking ahead, but their expectations are wrong.
During a sustained trend they happen to be right.
The vast majority of investors look ahead by looking through the rear view mirror.
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